While rising interest rates and lack of affordability have dampened housing market activity, consumers remain enthusiastic about purchasing a home as a pathway to building wealth and achieving an important life milestone.

Insights for What’s Ahead

• Affordability aside, the desire for homeownership remains strong. Consumers, despite the convulsions of the housing market both during and after the pandemic, still believe owning a home is a pivotal aspect of adulthood and a clear avenue toward wealth creation.
• Consumers still see homeownership as a part of achieving the American Dream. The slide in homebuying and purchases of big-ticket items that accompany home purchases appears to be a function of the significant rise in interest rates, not a general shift away from the goal of homeownership.
• The slump in housing activity is a necessary element of the Federal Reserve’s campaign to cool inflation. The result is evident in fewer home sales and a slowdown in construction.
• Millennial and Gen Z housing is likely to drive future demand. There should be long-term support for housing demand as more than 75 million millennials reach the age of peak home buying over the next two decades, and another 80 million Gen Z’s follow suit.

Consumers Still Desire Home Ownership

The US housing market is going through a rough patch presently as the Fed’s interest rate hikes to rein in inflation have raised mortgage rates—sapping demand for construction and purchases of homes. Housing starts are down by 400,000 from early 2022, existing home sales have collapsed by 2.3 million from a high of 6.6 million in 2020, and new home prices are down 18 percent from their peak. Nonetheless, the desire to own a home is still strong among American consumers (Figure 1).

Figure 1

Consumers still highly value homeownership as a path to wealth and freedom

Source: The Conference Board Survey of Multicultural Consumers, February 2023

During the pandemic, historically low interest rates, remote work, and millennials reaching a stage in their lives when homebuying becomes appealing (ages 35–45) drove homebuying to levels unseen since the Great Recession. Prices for new and existing homes also spiked. Rents typically reflect activity in new and existing home prices, with a lag, placing upward pressure on rents. In response to elevated inflation, the Federal Reserve (Fed), hiked interest rates by 5 percentage points, which also lifted mortgages rates to the highest levels in more than 20 years. Consequently, new construction of homes and sales of existing homes have tumbled, and prices now are coming back to earth (Figure 2).

Amid the extreme volatility in the housing market over the last few years it is not surprising that a survey of 2000 consumers conducted in February 2023 by The Conference Board revealed muted responses concerning willingness to purchase a home this year. The highest sentiment was among Black/African American consumers at 30 percent. With rents reflecting past increases in home price valuations, even renting a home ranked low among respondents. Hence, many existing homeowners are choosing not to move, in order to avoid taking on new, but higher mortgages, and persons who might have rented to live on their own are deciding not to, remaining with family or with roommates to help keep housing costs down.

Figure 2

Existing homes prices surged during the pandemic but are now falling as interest rates rise

Sources: Standard & Poor’s and The Conference Board

However, when asked if buying a home is an important part of life (i.e., “adulting”), respondents were overwhelmingly positive, with nearly two-thirds of all racial/ethnic groups saying so. Consumers aged 35 to 55 had the strongest positive sentiments about purchasing a home. Potentially this middle generation, which includes Generation X and Millennials, anticipates receiving inheritances from Baby Boomers to help support their homeownership dreams. Consumers earning $75,000 or more were also the most enthusiastic about homeownership. Still, consumers earning less money considered homeownership as an important milestone. Among consumers earning less than $35,000 Asian consumers (60 percent) were the most enthusiastic, followed by Latino/Hispanic (58 percent), Black/African American (56 percent), and White-Non-Latino/Hispanic (50 percent) consumers. Among consumers earning between $35,000 and $74,000, White-Non-Latino/Hispanic (68 percent) and Latino-Hispanic (67 percent) consumers were roughly equally enthusiastic, and among consumers earning $75,000 or more, Black/African American consumers were the most enthusiastic at (71 percent).

While home price valuations have rollercoastered in recent years, consumers also overwhelmingly viewed homeownership as a viable method of building wealth. Black/African consumers felt the most strongly positive (59 percent), followed by White-Non-Latino/Hispanic (56 percent), Non-Latino/Hispanic (55 percent), and Asian (54 percent) consumers. According to the Federal Reserve Board’s 2019 update of The Survey of Consumer Finances, most nonfinancial wealth was in the form of residential property, either as a primary or other type of residence (Figure 3). Hence, the sentiments of consumers, even amid fluctuations in housing market activity and prices, are consistent with data on building wealth. 

Figure 3

Housing wealth is the most common type of nonfinancial wealth held among US households

Sources: Federal Reserve Board and The Conference Board

Consumers also strongly believed that owning a home represented freedom. While not defined in the survey, freedom potentially includes better control over monthly housing expenses, fewer regulations (e.g., pets, outdoor spaces, rent increases), more conscientious neighbors, or the ability to design one’s living space according to one’s preferences. This sentiment was the most pronounced among consumers earning $75,000 or more, and among this cohort, Black/African American (65 percent) and White-Non-Latino/Hispanic (64 percent) were the most enthusiastic about this view. Only as many as 30 percent of consumers of any race or income bracket believed that renting represented freedom. This is a signal to businesses focused on housing construction, purchasing transactions, and goods and services related to housing that the current downturn in homebuying is probably temporary. Moreover, there is still long-term demand for housing among younger generations even though affordability may be a challenge to achieving the homeownership goal.

One final eye-catching observation was the notable share of consumers—30 to 40 percent by race/ethnicity—who anticipated a housing crash that would hobble the US economy. Consumers who believed this tended to be younger (i.e., below 55 years of age). By race and income White Non-Latino/Hispanic consumers earning less than $35,000 (44 percent) feared a housing collapse, and Black/African American (45 percent) and Latino/Hispanic (47 percent) earning $75,000 or more also believed a serious recession-inducing housing slump was going to occur.

We note that while housing activity has declined and prices have fallen, these developments are part of the Fed’s controlled slowing of the economy to combat inflation. Importantly, presently, household and bank balance sheets are in great shape, most mortgage rates are fixed, lending standards are tighter, and the majority of homes are not underwater—dynamics that were not the case during the housing crash that caused the Great Recession of 2008–09. Hence, despite the perceptions of consumers, a housing collapse that thrusts the US economy into recession this year or next is quite unlikely.

About This Report

This research, made possible by a grant from General Mills, is part of a series that explores the attitudes and behaviors of US multicultural consumers. The publications are based on biannual online surveys of 2,000 US consumers with Asian, African American/Black, Hispanic/Latino, and White (Non-Hispanic/Latino) heritage. The surveys have covered topics such as people’s attitudes and behaviors related to a range of product and services categories, as well as current topics.